Analyst warns about irregular use of international reserves

President Hugo Chávez resolved to transfer 1% of Venezuelan international reserves, about USD 300 million, to the Bolivarian Alliance for the Peoples of Our America (ALBA) bank.

"The proposal submitted by the Economic Council's of ministers to transfer a portion of our reserves to the Alba Bank is hereby approved," Hugo Chávez said on Saturday in the framework of the 11th Alba Summit.

Venezuelan economist José Guerra, ex manager of economic research at the Central Bank of Venezuela (BCV), labeled the president's remarks as "dangerous" for the stability and strength of the local currency. "Transferring reserves from the Central Bank of Venezuela leads to monetary destabilization."

Although Guerra regards it as a "political" announcement and highlighted that the transfer is not high, he noted though that the BCV "is not a financial institution for commercial purposes, but a bank set to currency stability."

Guerra recalled that in the past few years the BCV has been used to fund state-run oil company Petróleos de Venezuela (Pdvsa), and this has added "fuel to inflation."

The economist underscored that if the Venezuelan government is to enhance the ALBA bank it should use money from other available funds, such as the National Development Fund (Fonden).

"It is a strategic fund that has given us a greater economic power," said President Cháevz in reference to the fund.

Guerra questioned the effectiveness of the use of part of the international reserves in this project. "What is the ALBA bank going to do with that money? When will the other member countries allocate a similar amount?," the economist wondered.

Chávez informed that the purpose of transferring 1% of international reserves is to promote and finance regional projects.

"We have no problem. The Bolivarian Constitution obliges us to promote integration mechanisms in Latin America and the Caribbean, and this is one of them," the Venezuelan president noted.

The ALBA bank was set up in January 2008 during the 6th ALBA Summit, which was also held in Caracas.

Translated by Gerardo Cárdenas